Real Estate Terminology 101

There’s a learning curve involved with buying and selling property. This article will help you fill in a few blanks so you can hit the ground running. 

You don’t have to be fluent in ‘real estate’ when you buy or sell a house but it helps to at least have some understanding of the different terms you come across. 

A good agent will always take the time to explain things to you but if you’re still in the research phase, this list of common real estate terms will help. 

Ready? Let’s dive in… 

On market / off market

A home is sold off market when it is not advertised to the public. This can be a good strategy if the seller values their privacy or if the real estate agent can identify interested buyers without the need for a marketing campaign. Premium homes and unique properties are often sold off market based on the selling agent’s connections and their database of purchase-ready buyers. 

Vendor bid

A vendor bid is a strategy used in an auction scenario to move the bidding forward. It’s not technically a bid and the auctioneer must announce it as a vendor bid but it can incite the buyers to keep the bidding moving. 

Your Competition Creator™ agent will let you know whether or not you should make a vendor bid during auction proceedings.

Stamp Duty

Stamp duty, also known as ‘transfer duty’ tends to take people by surprise because they are so focused on their mortgage. This is the tax you pay when you buy a home.

Stamp duty is calculated based on the cost of the home and the way you plan to use the property. For example, a $1.2 million home purchased by a couple who intend to live in the home (and it’s not their first property purchase), will attract around $42,350 in stamp duty costs. 

Similar to income tax, the price is calculated on a sliding scale, for example if the home is worth more than $1 million, the purchaser pays $38,025 in stamp duty, plus $5.75 for each $100, or part of $100, over $1 million. 

Concessions may apply if you live in the property as your principal place of residence within one year of settlement and if you do not sell or lease out the property before you move in. First home buyers may also find they are exempt from stamp duty if they purchase a home worth less than $500,000. 

There is some more information about stamp duty and exemptions here. 

Conveyancing

Conveyancing is the process of transferring legal ownership of a property from one party to another. This involves the preparation, sharing and signing of legal documents. 

Most people hire a conveyancer or solicitor to help with this process. This expert understands property exchange contracts and can read them through to spot any clauses which may cause difficulties. They can also ensure notification of the change of ownership is given to the relevant government departments.

Settlement

This term relates to the period between when a buyer agrees to purchase a property and the day they officially become the owner.

Settlement usually takes four to six weeks but sometimes a longer time frame can be negotiated. During settlement, both parties’ conveyancers have time to walk them through the contracts and other requirements. The buyer has time to confirm finance and arrange for funds to be transferred from their bank or lender to the seller, and they can start investigating things like home insurance, electrical services and internet connections for the home. 

The seller will be busy preparing to vacate the property during settlement. If the home is an investment property, they can give the renters notice to move out. 

Instalment contracts

With an instalment contract, the seller becomes the lender. The buyer pays them in instalments instead of taking out a loan from the bank. 

The land will remain in the seller’s name until the final payment is made but there are a number of conditions which must be adhered to. If you want to explore this option, speak to your agent about how it could work and what stamp duty costs are involved, then work with a solicitor to confirm details such as interest, payments and other contract conditions. 

Capital Gains Tax

When you sell a piece of property for more than the amount you initially paid, you may be subject to capital gains tax (CGT). 

The amount will depend on how much money you made from the sale and how long you owned the asset for. For example, there is a capital gains tax (CGT) discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on the asset.

The good news is your main residence is exempt from CGT when you sell it. So if you’re ready to move on from the home you have lived in for years, you won’t pay this tax. However, speak to your accountant about whether the exemption definitely applies; if you lease part of the home out, if the home sits on more than two hectares or if you have been living overseas for an extended period you may find there is CGT involved with a sale. 

There is more information on Capital Gains Tax here. 

Our real estate agents are always on call during the settlement period to help answer any questions you may have. 

If you’re still unsure about any of the terms above or you want to figure out how they apply to you, we are always happy to explain. Contact our office and let us know your questions.  

I hope you enjoy the read.

Matt Lancashire